Asian Shares Mixed, Banks Lift Sydney

ColinNg

SINGAPORE -- Asian shares were mixed on Tuesday, with shares in Seoul held back by concerns about a possible rate hike this week while gains in Australian financial plays buoyed the Sydney market to a 10-month high.

Australia's S&P/ASX 200 was up 0.4% at 4887.8, Japan's Nikkei Stock Average was up 0.4%, South Korea's Kospi Composite was down 0.3%, Hong Kong's Hang Seng Index was off 0.6% and India's Sensex was 0.2%% higher. Markets in China remained shut on account of last week's Lunar New Year.

Dow Jones Industrial Average futures were up one point in screen trade.

Australia's headline index briefly touched a 10-month high of 4891.2, lifted by the financial and resources sectors.

Strong gains in U.S. financials Monday bolstered their Sydney peers, which were also helped by a bullish trading update from National Australia Bank. NAB's first quarter cash profit rose 18% to A$1.3 billion.

NAB was up 2.5%. Westpac was up 1.0% and ANZ Bank was 0.8% higher.

In the materials sector, BHP Billiton was up 0.9% and Rio Tinto gained 1.6% after the rise in London Metals Exchange copper prices to a record high Monday.

Macquarie Group bucked the broader market, falling 0.2% after it said profit in the second half ending March 31 was likely to be down 5.0% on-year, effectively downgrading its prior guidance that fiscal 2011 earnings would be flat from a year ago. The new guidance means the group's full-year results could undershoot the fiscal 2010 earnings by 10%.

"I still think the tone is mildly bullish and people are cautiously investing more in the market," said BBY senior institutional trader, Peter Copeland. "Leadership has been pretty narrow...but it's healthy to see the two biggest sectors performing well. And the geopolitical situation appears to be settling down, with oil prices edging lower."

Japanese stocks tracked Wall Street higher, but the Nikkei's gains were expected to be limited around the 10,750 level, given Thursday's options settlement, said Takero Inaizumi, the head of equities at Mizuho Investors Securities.

While he expects there will be room for the Nikkei to rise further next week, he said "the market is now characterized much more by the strength of support rather than where it may face resistance," as optimism surrounding the U.S. economic outlook grows.

Japan Tobacco was up 1.2% and electronic components maker Rohm rose 4.4% after both companies announced share buyback plans Monday.

Sumitomo Metal Mining was up 1.5% after the nonferrous metal firm late Monday raised its earnings outlook for the fiscal year through March due to higher-than-expected prices of gold, copper and other metals. It now forecasts a net profit of Y79 billion, compared with its prior forecast of Y69 billion.

Korean shares were lower as investors sold their holdings ahead of the Bank of Korea's policy rate decision on Friday.

"The Bank of Korea is likely to raise rates by at least 0.25 percentage points this month or next month to tame inflation, and investors, including foreigners, are selling domestic stocks," to lock in profits, said Oh On-su at Hyundai Securities.

Elsewhere in the region, Taiwan's Taiex was off 0.3%, Singapore's Straits Times Index was down 0.3%, Malaysia's Kuala Lumpur Composite Index rose 0.3%, Philippine shares were flat, Indonesia shares were 0.1% lower, shares in Thailand were down 0.3% and New Zealand's NZX-50 was off 0.1%.

In foreign exchange markets, the euro traded in a tight range against the U.S. dollar and the yen. Satoshi Tate, a senior dealer at Mizuho Corporate Bank, noted a lack of trading cues but added that the euro/dollar may fall further in coming sessions, as expectations for a U.S. economic recovery push U.S. Treasury yields higher.

"For U.S. bond yields to gain further, better U.S. economic indicators and more hawkish Fed comments are needed," he said, and added that investors will likely pay attention to speeches later in the global day by several members of the Federal Open Market Committee--Jeffrey Lacker, Richard Fisher and Dennis Lockhart.

The euro was at $1.3613 against the dollar, from $1.3583 in late New York trade Monday, and at Y112.02 against the yen, from Y111.82. The dollar was at Y82.28, from Y82.32.

Improved risk appetite in Asia pushed the Korean won to its highest level against the dollar since Sept. 12 2008. The dollar was last at KRW1,104.2, from KRW1,107.5 late in Seoul on Monday, after hitting a low of KRW1,102.50. Market players were watching if a key dollar support at KRW1,100 would hold.

Similarly, foreign fund inflows to the Taiwan stock market boosted the New Taiwan dollar to its highest intraday level against the greenback since Oct. 1997 at NT$28.900. The dollar was recently at NT$28.909 compared with NT$29.200 late Feb. 1, the last trading day before the Lunar New Year holidays from Feb. 2 to Feb. 7.

The lead March Japanese government bond futures contract was down 0.15 at 138.85 while the benchmark 10-year JGB yield was up one basis point at 1.295%.

Spot gold was at $1,350.70 per troy ounce, down $1.40 from its New York close Monday. The March Nymex crude oil futures contract was down $1.80 at $87.22 per barrel on Globex.

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